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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5028
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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My elderly relative (83 years) owns some land. Family wants

Customer Question

My elderly relative (83 years) owns some land. Family wants to sell the land. Should elderly relative sell and pass proceeds to rest of family or does it make more sense to transfer the land to younger family members and then sell it?
Submitted: 4 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 4 years ago.

Hello and welcome to the site. Thank you for your question.

There are two types of tax to consider

Capital gains tax
There is capital gains tax payable on the sale/transfer of land by your elderly relative. It would be based on the difference between the cost price and net sale proceeds. It does not matter whether the land is gifted and then sold by the younger family members or pass the proceeds from sale to them.

Inheritance tax
A gift of cash to other family members would be regarded as potentially exempt transfer for the puposes of inheritance tax and the seven year rule would apply .. it means If your elderly relative survives for seven years after making a gift to someone, the gift is generally exempt from Inheritance Tax, no matter what the value.

 

If the elderly relative were to die within seven years and the total value of gifts made is less than the Inheritance Tax threshold, then the value of the gifts is added to the estate and any tax due is paid out of the estate.



More information on PETs can be found here
http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm#4

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.



Customer: replied 4 years ago.


So my understanding therefore is that from a tax viewpoint it does not matter whether the land is transferred or not to other family members prior to being sold, the tax liability will still be the same. Is this correct?

Expert:  taxadvisor.uk replied 4 years ago.
Chris, thank you for your reply.

The tax liability will be the same either way.

I hope this is helpful and answers your question.
Expert:  taxadvisor.uk replied 4 years ago.

Hello Chris

I notice you have viewed my response to question on sale of land owned by elderly relative (JACUSTOMER-op2io4li- Last Viewed on 14/10/2013 at 14:34).

Just checking to see if you have any issues relating to your question that I may not have addressed. Please let me know if I can be of further assistance.